Are Tips Going Up?

Cashless payment tools can be super convenient, but these quicker checkout tools may cause you to tip more than you'd like.
Published
Tips jar on a cafe counter

Figuring out when and how much to tip can be stressful. With the proliferation of cashless payment options like Square and in-app tipping, it's easier than ever to leave a tip without worrying if you have enough cash, and to simply push a suggested preset tip amount.

SEE ALSO: How Much Should You Tip? A Guide to Tipping in 10 Common Situations

But is technology nudging us into tipping more? While some call it "tip creep" or "guilt tipping," the suggested amounts for tips have indeed gone up, and the number of situations prompting us to tip have increased. For example, while the old suggested restaurant tip hovered around 15%, the median is now about 18%. This is probably in part because apps like Square cause people to tip in situations they might not have previously.

Let's explore the ways that tech is changing how — and how much — we tip, and the role psychology plays in the tipping process.

Avoiding the 'Pain of Paying'

"Everyone is moving away from cash to credit cards," says David Scott Peters, founder of TheRestaurantExpert.com. "People tend to tip — and spend — more when they use credit cards."

Spending goes up when consumers aren't faced with the physical act of parting with their money.

The psychological term for feeling the lightening of your wallet is the "pain of paying," and research shows that spending increases when consumers aren't faced with the physical act of parting with their money. "You don't feel the money leaving your hand," Peters says. "They're not feeling it today. It's just a number on a piece of paper." (Or a button in an app, as the case may be.) People are more likely to round up, and instead of the old minimum of 15%, "you find your way closer to 20%," Peters says.

The Power of Suggestion

Until 2007, New York City taxis only had to take cash, and some drivers were initially reluctant to accept cards. Two years later, drivers felt differently with an extra $144 million in annual tips, which had increased from an average of 10% to 22%. With the credit card payments, riders were opting for default tip options of 20%, 25%, and 30%. (Incidentally, the 1947 guideline for tipping cab drivers was about 12%.)

More recently, Lyft drivers saw an increase in tips on rides over $25. That happened after the ride-hailing app increased its tipping prompts within the app to $2, $5, and $10, instead of the $1, $2, and $5 suggested tips for rides under $25.

SEE ALSO: 10 Sneaky Ways Retailers Fool You Into Spending More

When tipping is as simple as "hitting a button," Peters says, people often opt for the ease of a suggested amount. As with taxis and ride-hailing services, the suggested amount has also shifted upwards in restaurants. According to Nation's Restaurant News, suggested gratuity amounts even on the bottom of printed checks have increased from 15% to 18% at a growing number of restaurants.

Another factor also is responsible for the tip shift: There's an anchoring affect with suggested amounts, notes Nir Eyal, author of Hooked: How to Build Habit-Forming Products. When presented with three options, people tend to choose a middle option — instead of the lowest suggestion — to avoid feeling stingy.

'No Tip' Means More Pressure

Businesses that use Square for digital payments can create custom amounts or choose from Square tip defaults to display on a separate screen, or on the same screen as the customer signature. The default tipping options are in dollar amounts of $1, $2, or $3, or in percentages of 15%, 20%, or 25% — both with a "no tip" button, as well. This button has a significant impact on the way people tip.

Some customers are more likely to tip when they use cashless payment tools like Square. Why? Because they are less likely to press a "no tip" button.

According to a Software Advice survey, 29% of respondents said they would be more likely to leave a tip if they had to press a "no tip" button to opt out of tipping. "It's one thing to bypass a tip jar or just leave the gratuity line blank when you're signing a check, but it's harder to physically press a button saying you aren't going to leave anything," a Square blog post notes.

The "no tip" option creates a social pressure to tip — in fact, one expert jokingly referred to it as the "Costanza effect." However, it's been noted that businesses that use Square sometimes aren't the usual places where one would leave a gratuity. You could get a tip request when buying Girl Scout Cookies, for example. Some argue they feel pressure to tip more than they usually would at a coffee shop or counter-service ice cream shops and bakeries.

Proximity Matters

In the survey conducted by Software Advice, 41% of respondents said that close proximity to a server or cashier when entering a tip amount would "probably" or "definitely" increase the likelihood of tipping. Another aspect of the "no tip" button is that you're pressing it in view of the cashier, who has swiveled the screen toward you at the register.

SEE ALSO: This Bad Food Habit Could Be Costing You $2,000 a Year

The Software Advice report also notes that in the case of sit-down restaurants, when iPads are used, the server usually stays with the device until the check has been paid, instead of leaving the paper bill and walking away. Diners might end up tipping more with the server nearby.

Higher Tech, Higher Tips

In 2016, Square released data from a study on how mobile payments affect tips. While 67% of buyers tipped when their card was swiped, 71% tipped when they dipped an EMV chip card, and 73% tipped when making a tap mobile wallet payment.

Ease and Speed Have an Impact

While Square's data doesn't elaborate on why mobile taps increase tipping, the shift for many service-oriented payments is about "convenience and speed," Peters says. In Square's post about increasing tips, one suggested method is to take orders and accept payment while customers are in line to speed up the process. Ease and speed often lead to higher tips.

Time for Change?

It's been an eventful year for tipping policies, particularly in the restaurant industry, according to a 2017 roundup by Eater. While restaurateurs like Danny Meyer have eliminated tips entirely and opted for service-included bills, many restaurants that had experimented with eliminating tips returned to the practice. In the restaurant industry, tipped employees rely on those tips for most of their income. Depending on state law, some servers make as little as $2.13 per hour, while other states require that workers get paid additional wages or minimum wages.

When employers control worker tips, the boss gains and the staff misses out. If the Department of Labor legalized the pooling of tips, workers could lose $5.8 billion.

Currently, the Department of Labor is considering legalizing the pooling of tips of workers who are paid minimum wage. According to the Economic Policy Institute, this could result in $5.8 billion lost in tips, as it gives employers control of the tips without mandating that the pooled tips be redistributed among staff.

Some would rather err on the side of tipping instead of agonizing over the gratuity. Eyal sees both benefits and drawbacks of the digitalization of tips. On one hand, he notes, transactions are easier and faster, and bad or non-tippers get a nudge in the direction of tipping those in the service industry. "However, for the average person just trying to do the right thing, these devices can mean hundreds if not thousands of dollars spent unintentionally," Eyal writes.

However, Michael Lynn, a Cornell University professor who has spent decades researching tipping, maintains that his research finds tips actually enhance restaurant customers' satisfaction.

Readers, what do you think of "tip creep"? Should 18% be the new tipping minimum for most services? Let us know in the comments below!


Contributing Writer

Josie Rubio is a Brooklyn, New York-based freelance editor and writer. She has visited five continents so far and loves to write about travel, food, nutrition, health... and pretty much everything. Follow her on Twitter at @JosieRubio.
DealNews may be compensated by companies mentioned in this article. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).
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14 comments
snide
The price of goods goes up with inflation, so why should tips if a percentage? I agree with other posters - tipping seems to only still exist in US where it's kind of a callback to the days of aristocracy - which never even existed here. Let's get rid of it.
markrus
How about business owners paying their employees a decent salary in the first place (just like the rest of us have to), and stop expecting tips to make up their wages! Who ARE the biggest winners in these 'tip' service oriented industries?? It sure ain't me, you, or the employee...it's the business owner who's laughing all the way to the bank!
STOP tipping all together is my opinion! It used to be for great service, but the meaning got lost along the way, and now it's an expectation!
michael bonebright (DealNews)
I really like hitting the "suggested tip" button, because I genuinely hate doing basic math. If no suggested tip is given, I will inevitably write down some multiple of $5. Hey, if I was too lazy to cook tonight, I am definitely too lazy to add numbers together.
wiwanski
How about we do away with tipping altogether? Saves everyone a hassle. Your job is to provide good service, tip or no tip.

If you travel to Asia or Europe, generally there is no such thing as tipping. And it's great, especially for travel.
FlyingNinjaPandas
If anything, the comments show that there are many ways to perceive our culture of tipping. I'll toss in a couple more. The idea of earning tips? Work hard, provide great service and reap the rewards. Giving exceptional service guarantees nothing. People will tip as much or as little as they personally want with as much or as little regard to any aspect of service they get (or don't).

The stability of a worker's earnings varies based firstly on the state in which they work which the article mentions. There are 42 states that pay the substandard minimum that are required to make up the difference if tips + wages don't meed federal standards. Between 2010-2012, 83.8% of 9000 DoL investigations in the restaurant industry had wage/hour violations,

Coupled with the fact that tipped workers are 2x as likely to be in poverty, consumers are subsidizing employers of tipped workers through tipping and social programs. Talk about tip creep.

No judgement though, tip or not, it's your choice.
bikeral
To the person who works in a restaurant and is saying it is not 1990 and there is inflation, you need to get a clue. Prices in restaurants have gone up since 1990, so percentage wise so have your tips if you EARN the 15%. Instead of whining about customers not tipping you more, how about you ask the restaurant owner to pay you a living wage so that you don't have to depend on tips. With that said, if you worked a full shift on a large party and you only got a $5 tip, I have to think your service is not as good as you think it is.

Personally, I do %15 tip if the service is good. Going above and beyond will get you more.
Lindsay Sakraida (DealNews)
I live in a city, and often get groceries delivered. I order online, and they have an option to add tip. I often use that, because it's just easier than having the right cash on hand when they arrive. (I rarely ever have cash because I'm THAT person.) But I don't like the expectation of tipping before a meal; I almost always tip at 20% regardless, but it rubs me the wrong way to ask for a tip before the service is even rendered.

I guess it doesn't bother me with the groceries because I use the same service again and again, and I generally know what I'm getting into; and if a delivery is bad, I can always complain pretty easily and get compensated in some way.
twesterh
my wife and i started pizza fridays and are trying to find a different pizza place every week. i order the pizzas for carry out. i generally don't tip when i pick up the pizza but i did leave a couple of bucks once early on... then i asked my self, what the hell for?!

like another person mentioned, i once ordered online and they wanted me to add a tip. i haven't even picked up the pizza yet to see if it was cold, burnt, of if they skimped on the toppings. that offended me and i didn't add it. they option out was to click on "will tip in cash". how about no tip at all?! and i didn't, and i won't.
KnuckleSamRick
One thing I have a problem with is a place like the restaurant Crushed Red which seems to be taking a cue from Square and prompts customers for payment AND a tip at the cash register BEFORE the customer has received any food or service.

Bear in mind, that this is a "Subway" style restaurant where you go through a line to place your order and pay at the end of the line and then find a table. Then, when the food is ready, a server brings it out. So, they want you to tip before you even know if the order is correct, delicious, served promptly, etc...overall, not an approach I appreciate and I have not returned since my first visit.
joe1512
Um inflation affects base prices... you would not expect it to affect percentage-based tips.
A meal in 1990 cost 10 bucks and now costs 20 bucks. So a 20% tip is 2 bucks then, 4 bucks now but same percentage.

It is true that younger people tend to tip more, and it is more than likely exactly what the story said... a write-in on a receipt is a lot different than actually parting with your cash. Especially since young people have not lived through a depression.
DeletedUser169775
Person below me sounds like a server at a TGI Friday's.
sc122002
The reason it's going up from 15 is because it's not freaking 1990 anymore. People tend to tip on that low end because it's been the norm for so long. There are a crapload of people who still think even 10% is okay, when maybe it was in the 80s. Inflation happens, hence the average popping up to 18, ESPECIALLY since auto grat has been eliminated. Gotta love waiting on large party for hours at a time, takes up your entire shift and section, and you walk with 5 dollars for the shift. All because auto grat got eliminated from a majority of restaurants who didn't want to worry about extra taxes since the IRS cracked down on their shady practices.

Of course, suggestions are just that- suggestions, but this is why it's gone up like it has. It's a no brainer that those suggestions are based on good service- which is the usual cheapo response like the one below. "BUT IF THE SERVICE SUCKS I DON'T TIP MORE THAN X." I don't care. These averages are based on good service, derpy.
CinciShopper
IMO Tipping is 15% period unless someone does something up and above that. I rarely don't leave a tip at all unless I'm at a register paying for something and there's a tip line on the receipt and the cashier wasn't doing anything different than someone does at McDonald's or at a gas station.

There isn't any button in the world that is going to prompt me into tipping 18% or 20%. Great service equals great tips.
tradderjohn
if you look at the suggested tip on the bottom of the receipt its now listed as 18% 20% 22%